Correlation Between HEDGE Brasil and Valid Solues

Can any of the company-specific risk be diversified away by investing in both HEDGE Brasil and Valid Solues at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HEDGE Brasil and Valid Solues into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HEDGE Brasil Shopping and Valid Solues SA, you can compare the effects of market volatilities on HEDGE Brasil and Valid Solues and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HEDGE Brasil with a short position of Valid Solues. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEDGE Brasil and Valid Solues.

Diversification Opportunities for HEDGE Brasil and Valid Solues

0.3

Correlation Coefficient

HEDGE Brasil  Valid Solues

Weak diversification

The 3 months correlation between HEDGE and Valid is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding HEDGE Brasil Shopping and Valid Solues SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valid Solues SA and HEDGE Brasil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HEDGE Brasil Shopping are associated (or correlated) with Valid Solues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valid Solues SA has no effect on the direction of HEDGE Brasil i.e., HEDGE Brasil and Valid Solues go up and down completely randomly.

Pair Corralation between HEDGE Brasil and Valid Solues

Assuming the 90 days trading horizon HEDGE Brasil is expected to generate 3.56 times less return on investment than Valid Solues. But when comparing it to its historical volatility, HEDGE Brasil Shopping is 3.9 times less risky than Valid Solues. It trades about 0.11 of its potential returns per unit of risk. Valid Solues SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,021  in Valid Solues SA on December 31, 2024 and sell it today you would earn a total of  341.00  from holding Valid Solues SA or generate 16.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HEDGE Brasil Shopping  vs.  Valid Solues SA

HEDGE Brasil Shopping

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEDGE Brasil Shopping are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental drivers, HEDGE Brasil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Valid Solues SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valid Solues SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Valid Solues unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEDGE Brasil and Valid Solues

The main advantage of trading using opposite HEDGE Brasil and Valid Solues positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEDGE Brasil position performs unexpectedly, Valid Solues can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Valid Solues will offset losses from the drop in Valid Solues' long position.

The idea behind HEDGE Brasil Shopping and Valid Solues SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.